As price rations consumption, ‘it’s not all a bad thing’ for oil

After 38 years in the energy business, Tom Petrie has a unique view, but he was hardly alone in predicting sub-$100 oil earlier this year. The co-founder of advisory firm Petrie Parkman & Co., now a vice chairman with Merrill Lynch following its 2006 acquisition of his firm, says the oil market has confounded many this year as it continues into uncharted territory. During a recent visit to Houston from his home in Colorado, Petrie talked to Chronicle reporter Tom Fowler about the renewed debate over drilling in the Arctic National Wildlife Refuge and why a little “demand destruction” can be a good thing.

Q: In February, you, oilman T. Boone Pickens and others were saying oil could slip back into the mid-$80 per barrel range by the spring. What happened?


A: The key thing back then was it did look like we were getting a turn in the dollar, a strengthening. And it looked like the slowing of the U.S. economy might begin to create lower demand growth. But we know today, with benefit of more data, that even as the U.S. is slowing, there’s quite a delay of feedback making it back into China, India and the rest of Asia. So the overall call on OPEC oil has been pretty strong. So unless you get a stronger feedback into Asia’s economic activity, it’s hard to see much of a pullback in prices.

Q: Are speculators playing a role in the high prices?

A: Quite clearly there are financial players, and those financial players might be labeled speculators, but they are also subject to the same drivers of resource maturation and resource nationalism by countries like Russia, Venezuela and Nigeria. So, are they a factor? Yes. They operate with some leverage, but there is a risk in overstating that. There are really serious issues that are putting us at the point of practical peak oil. That’s different than geologic peak oil, but the impact is the same.

Houston Chronicle